Section 1220 — Corporation Tax Act 2009: Meaning of “unallowable purpose”

Meaning of “unallowable purpose” 1220 1 For the purposes of section 1219, investments are held for an unallowable purpose during an accounting period so far as they are held during the period—

a for a purpose that is not a business or other commercial purpose of the company, or b for the purpose of activities in respect of which the company is not within the charge to corporation tax.

2 For the purposes of subsection (1)(a) investments are not held for a business or other commercial purpose if they are held directly or indirectly in consequence of, or otherwise in connection with, any arrangements for securing a tax advantage.

3 In subsection (2) “ arrangements for securing a tax advantage ” means arrangements the main purpose, or one of the main purposes, of which is to secure—

a the allowance of a deduction (or increased deduction) under section 1219, or b any other tax advantage.

4 Any apportionment needed for the purposes of subsection (1) must be made on a just and reasonable basis.

5 In this section—

a “ arrangements ” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),

and b “ tax advantage ” has the meaning given by section 1139 of CTA 2010 .